Where America's economic good times haven't reached

ST. CHARLES, MO.
— The future looks bright for this old-line Missouri River town, which has become a thriving St. Louis suburb. Population has doubled, a new business park is luring in big-name firms like Coca-Cola - even the university is expanding. The city's renovated historic Main Street draws 1 million visitors a year.

But across the tracks, in one of St. Charles's poorer neighborhoods, Carolyn Sullivan sits in the basement of a local church surrounded by tables of donated clothing and boxes of government-surplus food.

She owns a Chevy Cavalier and a condo, but her $6.50-an-hour temp job with the Internal Revenue Service isn't moving her ahead. Once or twice a week, she stops here at the Oasis of Love Fellowship for a free meal.

In the midst of the longest and liveliest prosperity parade the United States has ever mustered, many of America's working poor find themselves almost no better off than they were at the beginning of the binge in the early 1990s, and worse off than they were 20 years ago. Low unemployment rates have not boosted their paychecks. Wall Street's surge has not stuffed their pockets with cash.

Even middle-income Americans have made only marginal gains since the period from 1978 to 1980. Meanwhile, the wealthy get wealthier and income disparity grows toward levels not seen since the Great Depression.

"There's been a divergence between our economy's productive capacity - the growth of the economic pie - and the slices that have been passed out," says Jared Bernstein, an economist with the Economic Policy Institute in Washington and one author of a new report on income distribution. "The bargaining power of the bottom 75 percent of the work force has really taken it on the chin."

On an average day, Oasis of Love serves 20 to 40 lunches and 40 to 85 dinners. The soup kitchen got rolling when donations came in after the great Missouri River flood in 1993. When the flood receded, the need did not.

This particular day's lunch is beef stew, green beans, and a huge roll. Rob, a short grizzled man with bright eyes, leads the 20 or so diners in prayer. Soon after lunch, his eyes glaze over into an alcoholic stare. He lives under a bridge.

Several regulars struggle with alcohol, explains Jerry Jones, pastor of the church. "They don't see any hope."

But George, another regular, faces a different problem. He owns his own business, renting space in a local garage to work on cars. But three years ago, he fired his two employees for stealing from him. His income plummeted. Instead of making $20,000 to $30,000 a year, he's earning about $4,000.

The strain shows. His tan shirt is spotted and not tucked in. In his mid-50s, he has trouble moving around the cars to fix them.

Nationally, families in the bottom fifth of the income ladder earned an average $12,986 from 1996 to 1998. They too have seen their income fall, not precipitously like George, but down an average 6 percent from the late 1970s (when inflation is taken into account). Those figures come from the new report cosponsored by the Economic Policy Institute and the Center on Budget and Policy Priorities, which also suggests that middle-income families haven't exactly flourished either. Since the late 1970s, their inflation-adjusted incomes rose a small 5 percent to an average $46,530.

The big winners of the go-go years of the 1980s and '90s were the wealthiest one-fifth of US families. Their income soared 30 percent during the same period to an average $137,485.

The new economy has brought more job opportunities, but not everyone can share in them equally. "People say: 'Go into a different business,' " George says. But "I can't read." And given the pressures of his situation, including $13,000 in credit-card debt, he says he can't concentrate long enough to learn.

Even Americans who can read haven't fared well in the new economy unless they've earned a high school diploma - indeed, most of the nation's working poor tend to be fairly educated high-school dropouts. According to a new report from the Federal Reserve, families headed by someone without a high school diploma have seen their inflation-adjusted income fall an average $2,000 from 1989 to 1998.

The advent of personal computers could be one factor.

"We're at an extraordinary change in technology and that may be contributing to the inequality," says John Weicher, senior fellow at the Hudson Institute and former chief economist of the Office of Management and Budget during the Reagan administration. "Some people learn to take advantage of it much quicker than others and there are real [income] advantages to doing that."

The boom on Wall Street has also skewed the picture.

"Do you know the Rule of 72?" asks Sullivan at Oasis of Love. She explains the mathematical shortcut, and how it makes it easy to figure out how quickly an investment will double at a given rate of interest. When her mother passed on, she received some money. "I made the mistake of investing some of it in CDs" - certificates of deposit. Looking back, she says she wishes she'd invested in the stock market.

Increasingly, Americans at all income levels are investing. In 1989, less than one-third of families owned stocks (either directly or through a mutual fund or retirement account). By 1998, just under half did, according to the Reserve report. And the median value of those holdings have more than doubled from $10,800 to $25,000 over the same period.

But the wealth hasn't been evenly distributed. Families earning at least $100,000 have seen their portfolios skyrocket 300 percent while those earning between $10,000 and $25,000 have seen a rise of 50 percent.

Furthermore, that doesn't count the other half of families that don't own any stocks. If they're included, the median value of stock holdings falls considerably. Even among middle-income earners (families earning $25,000 to $50,000 a year), it amounts to $400, points out Mr. Bernstein.

The good news is that these families have some stock. "A few years ago, it probably would have been zero," he says. "But the value that that family holds is not going to get them through a week without income."

*Parts 1, 2, and 3 of this series appeared on Jan. 28, Jan. 31, and Feb. 1.